Measuring The Flow Of Commodities

( Originally Published 1939 )

The diversity of distributive channels in the vast system whereby goods are sold and exchanged in the United States is pictured in "The Flow of Goods in the United States" which shows the movement of commodities from their origin as raw materials to their destination as finished products, and measures their increasing values at various stages throughout the entire process. The dollar value of the goods produced or distributed by each industry or branch of trade (e.g., agriculture, manufacturing, retail trade, etc.) is measured by the heights of the various colored rectangles, while the volume and direction of their distribution is shown by the colored bands of varying widths moving out to the right from each rectangle. In the same way the bands moving into each rectangle from the left show the source and value of goods purchased by each branch of industry. The bands describing an arc from the right side of each rectangle to the left of the same rectangle show the re-circulation, or movement of goods to organizations within the same industry or, as in the case of agriculture or mining, the use of products at the source. The criss-crossing of the bands and the opposite directions of the arrows on the Chart illustrate the diversity in the movement of goods and in the channels of distribution.

The Chart, it should be emphasized, measures only the flow of movable tangible commodities from the point of origin to the point of final sale as commodities, and not the total volume of trade as the term is ordinarily used. The latter would include in addition to commodity production and distribution a large volume of transactions in real estate and construction, securities, insurance and finance, electric power and light, the amusement business and other commercial, professional and personal services-indeed the entire range of economic activity involving the purchase and sale of services as well as goods.

In spite of minor omissions and possible errors it is believed that the Chart gives a reasonably authentic picture of the movement of goods in a year when our system of production and distribution was operating closer to capacity than at any time since. Although the total dollar volume of transactions in more recent years has been at lower levels, the relationships between the different branches of trade and production and between the volume of goods flowing through different channels probably remain approximately as pictured.

a. SALES FROM PRIMARY SOURCES

The value of goods entering the system, as shown in Table 10 and by the rectangles at the left side of the Chart, amounted to less than $22 billion, of which agriculture accounted for more than half and the extractive industries for more than half the remainder. These goods followed varied routes. Nearly two-thirds of the $12.4 billion worth of farmstuffs was sold to intermediary dealers for further distribution. Most of the remainder, in nearly equal shares, went to consumers ready for consumption, to manufacturing industries for canning and processing, and to agriculture, being retained on farms where it was produced or sold to other farms.

Extractive industries sold about 60 per cent of their $4.9 billion output to manufacturers, and about the same proportion of the $4.4 billion total of imports apparently consisted of raw and semi-finished materials bought directly by the manufacturing industries. Most of the remaining imports went to intermediary dealers for further distribution. About $1 billion of the output of extractive industries also went through the hands of intermediaries, but appreciable quantities, chiefly coal, were sold directly to retailers, consumers, utilities, and consuming institutions.

It will be noticed that each connecting band carries two figures, one at the place where it leaves the branch of production or distribution and the second where it enters the subsequent stage in the process. The difference between the two is the estimated amount added to the selling value by transportation charges. The bands therefore show both the volume and the direction of the flow of goods moved by the various agencies of transportation.